Companies could face hefty fines for failing to inform journalists
of the taxable value of their ’freebies’ under the Inland Revenue’s new
Self Assessment taxation scheme.
Under the system, which starts from the 1996/97 tax year, businesses can
be fined up to pounds 300 for not supplying the recipient of the benefit
with the correct information.
Benefits covered range from supplying journalists with a camera or hi-fi
to review to sending a travel writer to Jamaica for a week.
An additional fine of pounds 60 will be added every day until the
donator of the benefit supplies the recipient with the taxable value
details so they can log them on their tax return. The maximum penalty
for a business providing incorrect or incomplete information is pounds
3,000 per recipient.
According to accountants KPMG, which is researching the area, the
responsibility for monitoring freebies will fall on the shoulders of
in-house staff rather than PR agencies.
Therefore, even if the agency gives the benefit, its client will need to
ensure it has the systems and documentation in place to deal with the
new requirements. There are exceptions. Companies will not need to
report the donation of small gifts, worth up to pounds 150.
Corporate hospitality is also exempt from tax so long as it is not given
’in respect of specific services, past or future’.
’Many companies and journalists are becoming extremely worried about
exactly how these new rules will operate in practice,’ said KPMG tax
partner Leslie Ferrar. ’Guidance received from the Inland Revenue to
date is, to say the least, skimpy.’